Product Profitability
As a business owner, do you know the Product Profitability of Each and Every one of your Products?
If you can say Yes to that question, you would be an exception, as very few business owners know the profit each of their products make. However, understanding your product profitability is essential to the success of your business.
Product Profit is a simple concept > Sales Price less Product Costs = Product Profit.
Your current Sales Prices are obvious, but TOTAL Product Costs may not be so obvious. You know the cost of each unit of your product, that’s the per unit price you pay your suppliers for finished products you hold for resale or the raw materials (such as food items) used to produce the finished product you sell or serve your customers.
Beyond these per unit product supplier costs, are there other activities and hence costs necessary for delivery of the final product to your customers. For example, in the case of a restaurant the employee cost of preparing and serving the final food dish to the customer.
Once factoring in these product preparation costs, it might surprise you that certain of your products may in fact be unprofitable. It is extremely important to know this.
We can help. Contact Us for a Free Consultation about a Product Profitability analysis.